Leblon and Gávea After Rocinha Pacification

By Stephen Eisenhammer, Contributing Reporter

RIO DE JANEIRO, BRAZIL – The pacification of Rio’s largest favela – Rocinha – as well as neighboring Vidigal in November 2011, has had a dramatic effect on the communities, causing much interest in real estate developers. Yet while the pacification has affected the sense of security in neighboring Leblon and Gávea, it has not had the same dramatic impact on the real estate market as the city has seen in other areas.

Throughout Rio, pacification efforts and the establishment of UPPs (Police Pacification Units) in favelas has had predictable affects on bordering middle- and upper-class communities. Last year Santa Teresa saw a property boom, as real estate prices soared after the February inauguration of UPPs in the favela communities of Prazeres and Escondidinho.

Contrary to the hopes or expectations of some however, the occupation of Rocinha appears to have had little effect on real estate in the surrounding neighborhoods. Statistics reveal that after years of sharp growth the prices in the area have leveled out in the last six months.

According to real estate professional Johan Johnsson at Agente Imóvel, Leblon will retain its strong market and a buyer looking to reside in the area should still feel comfortable investing. Expansion of Leblon and Gávea is limited by geography, keeping supply short.

For a speculative buyer however, he suggests they should choose wisely given the current state of the world economy. “Brazil has not been unaffected by the Euro crisis and the downturn in the United States Transaction intensity has cooled of substantially and the rapid price appreciation has flattened out the last couple of months. We believe the pattern will remain in the nearest future,” Mr. Johnsson said.

The latest information shows that median price per square meter for Leblon increased with 4.1 percent to R$18,235 compared to the same period last month. While this number seems more than healthy, in the context of Rio’s recent real estate boom, the last six months have been underwhelming.

The average residential rent in Rio de Janeiro soared 21.4 percent in 2011, according to information from the FipeZap Index. For sales, the average square meter in Rio rose a staggering 34.9 percent – the most out of the seven regions surveyed.

“Of course house prices have gone up,” Dr. Gunter Flemig, the owner of Homes in Rio, which caters to foreigners looking to buy and rent prime real estate in the marvelous city, stated.

“The atmosphere in the whole of Rio has improved since the pacification operations.” According to Flemmig, security remains a major concern for prospective buyers, which has made the installation of UPPs a very welcome development.

Flemmig also commented that there has been a clear increase in demand for properties in Leblon and Gávea since pacification but explained that accurate statistics can be hard to come by in these neighborhoods as not enough properties are coming on the market.

Changes have not only taken place within the favelas themselves. Lena Thomas, an American photojournalist who has lived in Leblon for the past year, has noticed changes on the streets of Leblon. “I don’t remember such an active police presence in the area when I moved in last March,” she states.